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Outsourcing Market in Real Estate Is Growing as Fund Administrators Invest in Sector Specific Services: KPMG Survey

Growth in real estate outsourcing market: KPMG Survey

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A KPMG survey of more than 100 senior real estate professionals found a growing trend towards outsourcing as a result of fund administrators’ investing in real estate specific capabilities across people, process, technology and scale to enhance all aspects of service delivery.


According to the survey, the top two factors influencing the selection of fund administrators are expertise in real estate, 60 percent, and expertise with similar fund structures or portfolios, 58 percent. Approximately 84 percent of the respondents indicated that they outsource tax preparation and filing, generally to accounting firms.


“Providers are adopting different strategies, either through lift-outs or organic growth, to create a scalable business and capitalize on the needs of a growing marketplace,” said Phil Marra, National Real Estate Funds Leader, KPMG LLP. “The building of scale allows fund administrators to reduce the cost of delivery and make investments necessary to manage the complexities of expanding client portfolios.”


Greg Shaw, Director and Financial Services Lead for KPMG’s Shared Services & Outsourcing Advisory practice, added, “Service providers are recruiting and retaining talent with strong technical accounting expertise in real estate, while developing industry-leading processes specific to real estate fund managers. They are making investments in technology by acquiring or building platforms specific to real estate, reflecting the critical role these platforms are playing in delivering back-office real estate services.”


Important findings from the survey include:

  • 58 percent and 45 percent outsource property and fund accounting, respectively.
  • Real estate processes that are considered strengths by 50 percent or more of respondents include: advisory/management fee calculations, net asset value (NAV) and waterfall calculations, and preparation of tax returns and K-1s.
  • 43 percent of respondents indicated that technology solutions directly influence the selection of fund administrators. 
  • 51 percent of respondents cited cost as a major factor that influenced fund administration selection. 
  • Challenges that still exist in outsourcing are the loss of control versus in-house delivery: 33 percent indicated a loss of flexibility on ad hoc requests and 29 percent felt that there was a decline in service in comparison to in-house teams.


For more information on survey results, please read Real Estate Fund Administration 2.0 – Insights From the 2018 Outsourcing Survey.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the independent U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s independent member firms have 189,000 professionals, including more than 9,000 partners, in 152 countries.

Contact

Andreas Marathovouniotis
KPMG LLP
201-307-7608
917-957-1174 (c)
amarathovouniotis@kpmg.com
 

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